Contributors Q: Will Georgia’s Newest Legislative “Fix” to Bad-Faith Insurance Litigation Work? A: … Maybe? Georgia Senate Bill 83, which came into effect on July 1, retools the Georgia Code governing settlement offers for motor vehicle personal injury cases. Although it represents a step in the right direction, only time will tell whether it provides much needed certainty to bad-faith insurance litigation. It is an understatement to say that insurance policy demands in motor vehicle personal injury actions (often dubbed“Holt demands”) remain a contentious and needlessly complex issue in Georgia. From a policy perspective, Georgia courts recognize a cause of action for an insurer’s bad-faith (or negligent) failure to settle for good reasons: to better align an insurer with the interests of its insured and to discourage insurers from rolling the dice in litigation. In practice, however, Holt demands have proven ripe for abuse. Plaintiffs’ firms frequently wield “set-up” Holt demands—using laundry lists of conditions, strict to-theletter compliance, and shady releases to elicit a denial and ensnare insurers in multimillion-dollar bad-faith insurance litigation. One particularly infamous Holt demand “was 39 pages long and contained 30 footnotes” and was riddled with conditions, making it nearly impossible to comprehend much less accept. Complicating matters, courts recently have avoided addressing other legislative fixes to Holt demands, leaving insurers without any answers for a plaintiffs’ bar keen on manufacturing any basis to tee up bad-faith litigation. Senate Bill 83 revises O.C.G.A. § 9-11-67.1 to address these issues and curb some of the more significant abuses with Holt demands. First, SB 83 specifies “the only material terms” that may be included in a valid Holt demand. Second, although a Holt demand may contain other “immaterial” terms, SB 83 creates a safe harbor for recipients so long as they (1) accept the material terms of the Holt demand “in their entirety”; and (2) have not previously rejected a valid Holt demand. Finally, SB 83 expands these requirements to apply to any offer to settle a tort claim for bodily injury or death arising from a motor vehicle collision, “even where such offer expressly provides that any or all of [O.C.G.A. § 9-11-67.1] does not apply to such offer” and even if the offer requires waiving these requirements. Will these changes finally put an end to Holt demand maneuvering? Probably not, at least not completely. For starters, the parties will typically not litigate compliance with SB 83 until after bad-faith litigation has commenced for a supposedly “rejected” Holt demand—which forces insurers to confront the prospect of a massive judgment. SB 83 also did not address that insurers ostensibly seeking “clarification” about a release can only do so at their peril. History suggests that plaintiffs’ lawyers will claim that any attempt to seek “clarification” is actually a rejection to tee up bad-faith litigation, notwithstanding the Georgia General Assembly’s attempt to eliminate these arguments in the original version of O.C.G.A. § 9-11-67.1. And there’s no doubt that enterprising plaintiffs’ counsel will leverage any ambiguity with the “material” terms of a demand and push the limits of these new requirements. Still, SB 83 represents a step in the right direction to providing some additional direction and clarity for insurers when a Holt demand comes through the door. n Bad-Faith Statute Contributor Alan Pryor Partner Litigation & Trial Practice alan.pryor@alston.com 8 Annuities 9 Sam Park Partner Litigation & Trial Practice samuel.park@alston.com Jason Sigalos Associate Litigation & Trial Practice jason.sigalos@alston.com Gillian Clow Senior Associate Litigation & Trial Practice gillian.clow@alston.com Department of Labor’s New Fiduciary Rule Put on Hold Federation of Americans for Consumer Choice Inc., et al. v. United States Department of Labor, et al., No. 6:24-cv-00163 (E.D. Tex. May 2, 2024). This lawsuit arises out of a new rule promulgated by the Department of Labor (DOL) on April 25, 2024 that broadened the scope of who is considered an “investment advice fiduciary” under ERISA and amended provisions for the compensation insurance agents can receive when they are deemed to be fiduciaries under the new rule. The plaintiffs allege the DOL’s new rule wants to “fundamentally reshape” 50 years of settled practices in the insurance industry and specifically would require that any professional recommending a product, such as annuities, to an investor when rolling over assets from an employer-based plan to an IRA to be deemed a fiduciary. The plaintiffs seek to strike down the new rule and its amendments on the grounds that it is contrary to the law and arbitrary and capricious. The plaintiffs filed a motion for stay of the effective date and preliminary injunction, arguing that 86,000 life insurance agents around the country are affected by this new rule, and that, as a result of it, there will be a loss of access to annuities, which is antithetical to the interests of members of the middle class saving for retirement, who need the security annuities provide. The plaintiffs’ motion was heard on July 23, 2024, and the court issued an order granting it two days later. In its 42-page order, the court noted that the Fifth Circuit had previously vacated a prior attempt by the DOL to expand the meaning of “fiduciary” under ERISA because it conflicted with the plain text of ERISA, was inconsistent with ERISA’s “fiduciary” definition, and unreasonably treated numerous financial services providers “in tandem with ERISA employer-sponsored plan fiduciaries.”The court found that the “2024 Fiduciary Rule suffers from many of the same problems.”The court found that the plaintiffs are likely to succeed on the merits of their claim because the 2024 Fiduciary Rule conflicts with ERISA in several ways, including by treating as fiduciaries those who engage in one-time recommendations to roll over assets from an ERISA plan to an IRA. The court stayed the effective date of the rule until further order form the court. n
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